Council should not repeat billion-dollar energy boondoggle on solar power deal

Jay Janner/AMERICAN-STATESMAN – Larry Weis, General Manager of Austin Energy, testifies at City Council about a possible rate increase a couple of years ago. This week, Weis recommended purchasing some solar power.

The Austin City Council took a sensible approach in deciding on how much solar power to purchase now and how much to buy later. Let’s hope later doesn’t mean later this month, later this year, or later next year.

Time is on the city’s side when it comes to buying solar power. Rushing into things could have disastrous consequences: Remember the multibillion-dollar bio mass plant? That deal had to be closed immediately. No time to wait for market forecasts. No time to assess risk. Got to buy now. That was 2008. Shortly thereafter came the Oops! Moment.

Austin Energy officials under a different general manager, Larry Weis, learned from that boondoggle. For the foreseeable future, unfortunately, the city is legally bound to that deal. And Austin Energy customers are paying significantly higher rates because of that.

This week, the council wisely followed Weis’s recommendation to buy up to 300 megawatts of solar energy from companies whose bids came in at low prices, about 3.8 cents per kilowatt hour.

Austin Energy didn’t buy more because the price was too high in the other bids that were submitted. Also, buying more than 300 megawatts at any price exposes the utility to too much risk in a market in which solar prices are expected to decline. In other words, if we buy more at 3.8 cents per kilowatt hour and prices go down, we have another Oops! Moment. And yes, our rates will rise in those cases as we would be selling solar to the grid at a loss.

But this is Austin. And just as in the bio mass case, there are a lot of politics going on behind the scenes with solar power deals that involve influential environmental activists and lobbyists pushing hard to buy all 600 megawatts now. I give them credit for wanting to green up our power supply, but that lofty goal must be balanced with other city values, such as affordability and preservation of Austin Energy’s monopoly.

Tom “Smitty” Smith believes the council can meet city goals of obtaining all 600 megawatts of solar energy by 2017. Not just 300 megawatts – as the council did this week on advice of its experts, but all 600. Smith, who heads Public Citizen’s Texas office, did tell me that the prices submitted by losing bidders for an additional 300 megawatts were too high.

His solution is to let Mayor Steve Adler, a skilled lawyer, negotiator and mediator, do the hard-knuckle wheeling and dealing on those contracts.

“There is a tremendous opportunity for the mayor to renegotiate with unsuccessful bidders,” Smith told me. “Now that everyone knows the winning bid is below 3.8 cents per kilowatt hour, they know they will have to meet it or beat it.”

Sounds good, except for one tiny thing: Austin’s charter, the city’s governing document, assigns that authority to the city manager and/or his designated employee (in this case, Austin Energy’s general manager).

Neither the mayor nor the council has such authority under the charter, so doing that would violate it and usurp the city manager’s authority. Thankfully, Adler seemed to notice that in his comments from the dais on Thursday when he directed Austin Energy to continue negotiating.

That brings up the issue of the council’s authority, which the charter limits to policy-making. District 2 Council Member Delia Garza referenced that authority during Thursday’s council meeting.

She publicly upbraided Austin Energy officials for “an inappropriate Tweet,” the utility posted on social media. The utility had tweeted the Austin American-Statesman’s Thursday editorial about the solar power deal, which supported Austin Energy’s prudent recommendations as the best way forward.

Garza argued that Austin Energy officials, by tweeting the Statesman’s editorial, crossed the line into policy-making. What’s more, she is demanding a report from City Manager Marc Ott explaining the inappropriate Tweet’s infringement on the council’s authority.

Have to admit, I didn’t see that one coming.

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